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Fuelled by operators' expansion and government support, telecom growth is now taking off in semi-urban and rural areas. In the near future, a majority of new subscribers are expected from here. Mobile phones operators and manufacturers see an enormous growth potential in the rural sector, and are now formulating new ways to grab a larger share of the rural pie.

From launching low cost handsets to bringing down the tariffs and organizing campaigns to advertise their plans, telecom players are now accelerating the already cut-throat competition in the hinterland.

Next Wave
It is believed that the next wave of mobile growth will come from the bottom of the pyramid. For a majority of the population in the rural segment, the mobile phone is the first communication device. Going hand-to-hand with telecom operators, MVAS providers are also ready to explore rural India. Rural should not always be interpreted as poor and therefore some categories of MVAS might apply directly to them.

The increasing rural penetration of telecom players is believed to help in increasing the ARPU of VAS players as well. But VAS players have a different opinion. They believe that rural expansion might not necessarily help in increasing ARPU in the near-term, especially since rural services will take some time to evolve, and in general, the rural consumers have low ARPU from an overall telecom spend perspective.

According to Vijay Shekhar Sharma, MD, One97 Communications, "Rural expansion will help increase the overall revenue-base based on the already deployed infrastructure. In the long term, the operator's ARPU for this segment will expand due to increased VAS take off."

Content is King
Rural VAS is turning out to be a huge opportunity as operators expand in this area. But innovative and relevant content catering to the needs of the rural masses would be the key to success for VAS providers. Basically, rural segments have two sets of needs: needs similar to the urban market, for example infotainment content, updates on various utilities; and second, needs unique to rural areas, like rural-focused content, commerce transactions, updates on local activities, etc. And to expand successfully in rural India, VAS players should develop applications addressing both these needs.

Talking about applications for the rural segment, Sangeet Chowfla, CSO, Bharti Telesoft says, "We have a host of offerings that enrich the lives and enhance the livelihood of the rural segments. Some address the underlying needs to enable greater uptake of mobile services, such as our PreTUPS prepaid solution."

He adds, "We are working on a range of solutions in three core areas: content-together with the content providers we aim to provide relevant infotainment services to the rural segments such as economic data, agriculture-related information, as well as mobile music and entertainment services; commerce-by enabling mobile banking, remittance and payment services via a trusted financial institution to ensure access to financial services for the many rural dwellers currently relying on informal, and often unreliable and expensive methods; and community-via IVR services that are available in local languages and messaging services that are intuitive.

On the other side, One97 Communication has developed and deployed the VAS platform for the Airtel IFFCO Kisan Sanchar Project to connect farmers by launching their 'Dakia service'. This is a unique case of user-generated content and collaboration application tailored to suit the needs of the rural population.

"We provide a platform where people of a region having relevant information can share it with other members of the group," says Sharma of One97 Communications.

M-commerce has considerable potential in rural India. As stated by TRAI in its consultation paper, mobile-payment will be a great benefit, particularly in rural and remote areas where there is easy accessibility of mobile phone services, but banks are not easily accessible. The RBI has also taken some initiatives in this direction.

Kirusa, a leading vendor of voice SMS and developer of MVAS, is also enhancing its service portfolio to fulfill the demands and requirements of the rural masses. The company is providing voice SMS services on fixed lines as well. "People in rural India go to PCOs and sometimes the person they are trying to contact is not reachable. So they can use voice SMS by just dialing the code and communicate to the person easily without waiting for hours," says Inderpal Mumick, CEO, Kirusa.

Kirusa is also providing IVR services in local language. This makes IVR services simple and can be used by any person in the rural market. Mumick adds, "The command to use voice SMS is very simple and can be easily explained to people in rural India on the way to use. Those who are unable to read can learn it from IVR."

MVAS is going to address two main needs of rural consumers-connectivity and entertainment. Connectivity will provide information VAS. Mobile also has the potential to evolve as a key entertainment mode considering the lack of other entertainment options in rural areas. So, by leveraging these two aspects, MVAS can be a success in rural areas.

Mauj Mobile has aggressive plans of penetrating into rural areas of India with a holistic range of offerings suited for specific territories. It has a large repertoire of devotional content, which has been very well received in rural areas. It has already successfully leveraged key partnerships in the southern markets for providing film contents. Mauj has also created Marathi and Bhojpuri content for rural subscribers.

Demands of the Segment
According to Sharma of One97, "The focus of rural expansion has to be services which enable the rural population to have access to infotainment content, and updates on local utilities in local languages. The content has to be delivered in a medium which is easily reachable and usable. The primary focus is on voice applications for now. "

Going rural also means covering geographies where there are few entertainment and information outlets other than television. This has given a fillip to MVAS. Apart from having access to entertainment, rural consumers are also willing to spend a little more on mobile phones, primarily because it is a device that empowers them.

Expressing his view on the demands of this segment and focus areas for rural expansion, Chowfla of Bharti Telesoft says, Developing affordable product lines is the key to reducing cash barriers for entry and to expand the mobile market. Performance ratio needs to be tailored to the distinct consumption profile of people at the base of the pyramid."

Explaining the demands of potential and present rural subscribers, Manoj Dawane, CEO of Mauj Mobile, says, "Rural markets are a different audience. The content served to them needs to be customized to suit their requirements and preferences. Localized regional content and utility-based info services have great potentials in this market."

What Lies Ahead
According to a Gartner report, the total cellular service revenue in India will grow at a CAGR of 18% from 2008-2012. The mobile subscriber base will increase to over 737 mn connections by 2012. The cellular market penetration is projected to increase from 19.8% in 2007 to 60.7% in 2012, due to the rapidly proliferating rural market, low tariffs rates in the Indian market, increasing focus on the rural market and lower handset prices.

Success in the rural market is dependent on the interplay of a multitude of complex factors. On one hand, government policies will probably play the most critical role in growth of MVAS in rural India. This will affect penetration drivers such as the level of competition in the sector, tariff and non-tariff barriers for ICT products, and use of Universal Service Obligations Funds for the development of rural telephony.

Low literacy level of those living in rural areas will be another limitation. Therefore, voice in regional languages would be a better option for communication and will facilitate vernacular services in the rural areas. Marketing the content in the rural market is going to be all the more challenging. This would require right packaging and pricing of MVAS.

It is without doubt that innovative services by VAS players will make the lives of farmers and rural inhabitants easy. But how can we overlook numerous instances where there are mobiles but no electricity to charge them? There is a long way to go before rural VAS becomes a way of life in the hinterland.

Arpita Prem
arpitap@cybermeda.co.in